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Spending rebounds in September with biggest lift in 4½ years

Spending rebounds in September with biggest lift in 4½ years

Business Sales Indicator (BSI) rises by 3.9 per cent in September – marking the biggest monthly gain in 4½ years

Spending is up 6.9 per cent on a year ago, after being up 3.4 per cent in the year to August

Hotels & Motels, Miscellaneous Stores, and Repair Services see strongest monthly trend increases, with Service Providers, Mail Order & Telephone Order Providers, and Airlines among the weakest sectors in September

The trend BSI has now risen for 16 straight months in Northern Territory, 15 straight months in Queensland, 14 straight months in South Australia and 12 straight months in the ACT

24 October 2012: Following a fall in business sales in both July and August, economy-wide spending rebounded in September, lifting by 3.9 per cent, according to the latest Commonwealth Bank Business Sales Indicator.

The BSI* is a key measure of economy-wide spending, tracking the value of credit and debit card transactions processed through Commonwealth Bank point-of-sale terminals, a sample of approximately 30 per cent of the Australian market.

The seasonally-adjusted increase marks the biggest monthly gain in 4½ years and follows on from solid increases in May and June but declines in July and August. In a further boost for businesses, economy-wide spending is up 6.9 per cent on a year ago, after being up 3.4 per cent in the year to August.

According to Adam Bennett, Executive General Manager, Local Business Banking, Commonwealth Bank, while the rebound is positive for businesses, it remains to be seen if this increase can maintain momentum over the coming months.

“There was a significant rebound in spending in September, which saw the biggest monthly gain in over four years. However, while this is an encouraging result, businesses should be mindful that the data is volatile and presently consumers are not displaying any meaningful or consistent spending trends.

“Due to the ongoing inconsistencies we’ve experienced in recent months, it is as important as ever for businesses to have solid plans in place, and remain prudent as consumers continue to show signs of caution,” said Mr Bennett.

Craig James, Chief Economist of the Bank’s broking subsidiary CommSec and author of the BSI, said the results are reflective of the patchy nature of the economy.

“Over the past five months, we have seen fluctuating peaks and troughs in consumer spending. The good news is that interest rate cuts are having tangible flow-on effects for businesses, which we’ve seen through several increases in spending this year.

“While we saw a 3.9 per cent increase in sales in seasonally adjusted terms this month, the less volatile trend measure has remained relatively flat for the past three months. Hopefully the recent interest rate cut in October will spur consumer confidence, and continue spending momentum in the lead up to Christmas,” said Mr James.

Across sectors, 10 of the industry sectors fell in trend terms in September, up from nine sectors in August. The strongest monthly trend increase in sales occurred in Hotels & Motels and Miscellaneous Stores (both up 1.0 per cent) followed by Repair Services (up 0.6 per cent) and Clothing Stores and Professional Services & Membership Organisations (both up 0.8 per cent).

Amongst the weakest sectors in September were Service Providers (down 3.2 per cent), Mail Order & Telephone Order Providers (down 2.7 per cent), and Airlines (nfp).

State analysis – SA and TAS mark strongest results

Just one of the States and Territories recorded weaker sales in trend terms in September. Sales in NSW fell by 0.3 per cent. The strongest results were in South Australia and Tasmania (both up 0.8 per cent) followed by Northern Territory (up 0.6 per cent), Queensland and the ACT (both up 0.2 per cent), and Victoria (up 0.1 per cent). Sales were flat in Western Australia.

The trend BSI has now risen for 16 straight months in Northern Territory, for 15 straight months in Queensland, for 14 straight months in South Australia and 12 straight months in the ACT.

In annual terms, no State or Territory had sales below a year ago. Strongest growth was posted in South Australia (up 16.9 per cent), followed by ACT (up 12.4 per cent), Queensland (up 9.9 per cent), Northern Territory (up 7.9 per cent) and Western Australia (up 7.4 per cent).

The Commonwealth Bank Business Sales Indicator is calculated by tracking the value of credit and debit card transactions processed through Commonwealth Bank merchant facilities throughout Australia (approximately 30 per cent of the market).

The Business Sales Indicator has been devised to provide a monthly assessment of spending trends in the Australian economy (covering 20 industry sectors and all Australian states and territories) and is available to the public on the Bank’s website and to the media on or around the 20th day of each month.

Credit and debit card transactions can be volatile on a month-to-month basis, affected by seasonal and irregular factors. To better gauge the direction and changes of spending across the economy, the Business Sales Indicator is tracked in trend terms. The seasonally adjusted and trend estimates of the BSI results are derived via the SEASABS statistical program from the Australian Bureau of Statistics.

The monthly Business Sales Indicator has been devised to provide a more timely assessment of spending trends in the economy. The main monthly indicator of spending in the economy is the Australian Bureau of Statistics’ (ABS) Retail Trade release. However these statistics cover just spending at retail establishments, and exclude spending at a raft of other businesses.

The Business Sales Indicator includes transactions made at traditional retail establishments such as supermarkets, clothing stores and cafes & restaurants and as such is more comparable to the ABS Household Final Consumption Expenditure released on a quarterly basis. The Business Sales Indicator also covers businesses such as airlines, car dealers and utilities such as water and electricity companies as well as motels, business, professional and government services and wholesalers.

The Business Sales Indicator includes industry sectors based on the International Merchant Category Code (MCC) categories. MCC is a four-digit number assigned to a business when the business first starts accepting cards as a form of payment.